DEFINITION OF ‘ENEMY NATIONS’ IN CONTRACT

Anyone who voluntarily resides in an enemy or enemy-occupied territory is considered an enemy

alien. Any agreement made with a person who is of enemy country that contract becomes void.
Again, a contract formed during peacetime might be cancelled if one of the parties of contract
becomes an enemy nation. The parties turn into an extra-terrestrial adversary. But this is not a hard
and fast rule. However, if its performance involves no intercourse with the adversary and is not
otherwise against public interest, such as a split from one's spouse an understanding between a
husband and his wife, who has turned hostile. Again, nonetheless Once a contract is terminated, all
rights that may have accrued to either side prior to the invalidating event continue to be enforceable
and legal upon peace.

Ertel Bieber & Co. vs Rio Tinto Co1 “A contract between the respondents, a queen company, and
the appellants, a German company, stated that the latter would provide the former with cupreous
sulphur from 1911 to 1919. The contract included a provision stating that if (among other things)
war prevented deliveries, the obligation to deliver should be suspended for the duration of the war
and for a reasonable amount of time afterwards. Ruled that the agreement was terminated when war
broke out with Germany and that the suspensory clause had no bearing”.

Arab Bank, Ltd vs Barclays Bank2 ,“The pertinent facts were, in a nutshell, as follows. The
defendant, Barclays Bank (Dominion, Colonial and Overseas) Ltd, which had its registered office in
England, established a current account with the Jerusalem branch of the plaintiff, Arab Bank, Ltd, in
1989. The Provisional Council of State and Provisional Government of the State of Israel were
established concurrently with the conclusion of the British mandate over Palestine at midnight on
May 14, 1948. Palestine had been under British rule until that time. There had been significant
unrest in Jerusalem before to that date, and it was probable that Jews and Arabs would soon engage
in open warfare. The defendants were initially charged with refusing to pay the plaintiffs' demand
for the sum that was due on their account with them before the mandate expired or failing to do so.
This was part of the plaintiffs' original complaint. As a result, the plaintiffs argued that they had a
right of action against the defendants for the balance's equivalent in sterling. On the other hand, the
defendants disputed any demand for the repayment of the remainder, and Parker J. discovered that

1 Ertel Bieber & Co. vs Rio Tinto Co (1980) A.C. 260

2 Arab Bank, Ltd vs Barclays Bank (1954) AER 226

no demand had been made as a matter of fact. In either the Court of Appeal or the House of Lords,
this factual conclusion was not contested”.

ESSENTIALS OF CONTRACT FORMATION

Section 103 of Indian contract Act provides for the elements which are essential in order to
constitute a valid contract. It reads as follows “All agreements are contract if they are made by the
free consent of parties competent to contract, for a lawful consideration and with a lawful object,
and are not here by expressly declared to be void”.

Thus, the essential elements of a valid contract can be summarized as under:

• An agreement

• The parties should freely agree to the terms of the agreement.

• The contract must be signed by parties who are legally able to do so.

• It should be for legal considerations alone.

• It must be with a legal object.

• It shouldn't have been specifically declared invalid.

• Formalities under various laws: Nothing in this section affects any law currently in effect in
India that requires contracts to be made in writing or in the presence of witnesses or any law
governing the registration of documents. This includes laws that are not expressly repealed
by this paragraph.

• A desire to establish a legal connection.

When we talk about essentials of contract with enemy nation all these conditions are also required
but the main emphasis is on these essentials -

1. It should be for a lawful consideration.

3Indian Contract Act 1872

 2. It should be with a lawful object.

3. 1. It shouldn't have been explicitly deemed invalid.

It should be for a lawful consideration-Every agreement is supported by consideration of both

parties, if is too enforceable by law. The sum of money used to purchase the other contractual
party's commitment is known as the consideration. This price does not, however, have to be
expressed in monetary terms. A promise is considered nudum pactum and is not legally binding if it
is not backed up with something of value. It must also be legitimate and authentic to receive the
attention. According to legal jargon, a contract must entail the exchange of legal "consideration" in
order to be enforceable. Anything of worth—tangible or intangible—that may be exchanged for
something else of value is considered a lawful consideration. Consequently, there has to be
reciprocal attention between the contracting parties. Indian Contract Act defines consideration in
section 2d as “When, at the desire of the promisor, the promisee or any other person has done or
abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing,
something, such act or abstinence or promise is called a consideration for the promise4”. “All
agreements are contracts if they are made by the free consent of parties competent to contract, for a
lawful consideration and with a lawful object, and are not hereby expressly declared to be void5”.

In Willam vs Roffey6 “Williams was the carpenter subcontractor for Roffey, who had a contract to
renovate a block of apartments. After the construction started, it became clear that Williams was
having financial issues since she had overestimated the cost of the project. Roffey agreed to provide
Williams an additional payment per apartment because they were worried that the work would not
be finished on time and that they would then be in violation of a penalty provision in their primary
contract with the owner. Williams finished several flats' worth of work but was not fully
compensated. He quit working and filed a claim for compensation. Roffey contended in the Court
of Appeal that Williams had not broken any laws since he was merely carrying out his contractual
obligations. It was held that where a party to an existing contract later agrees to pay an extra
“bonus” in order to ensure that the other party performs his obligations under the contract, then that
agreement is binding if the party agreeing to pay the bonus has thereby obtained some new practical
advantage or avoided a disadvantage. In the present case there were benefits to Roffey including (a)

4 Indian Contract Act 1872

5 Indian Contract Act 1872
6 Willam vs Roffey [1991] 1 QB 1

 making sure Williams continued his work, (b) avoiding payment under a damages clause of the
main contract if Williams was late, and (c) avoiding the expense and trouble of getting someone
else. Therefore, Williams was entitled to payment”. Therefore, lawful consideration is important in
each aspect of contacts.

The most crucial need for a deal with an enemy country is that it should have a legal purpose. In a
similar vein, the agreement's purpose must likewise be legitimate and not contrary to the law. Any
legally prohibited behaviour will be void, and such agreements cannot be regarded as contracts. For
instance, if X lends his home to Y for the purpose of prostitution or the manufacture of bombs, the
agreement is void since it has an illegal purpose. As a result, such an arrangement cannot be
regarded as a binding contract. As a result, both the consideration and the agreement's purpose must
be legal.

Definition of lawful object is given in Indian contract Act sec237 “The consideration or object of an
agreement is lawful, unless it
is forbidden by law ; or is of such a nature that, if permitted, it would defeat the provisions of any
law; or is fraudulent ; or
involves or implies, injury to the person or property of another; or the Court regards it as immoral,
or opposed to public policy” .

The consideration or purpose of an agreement is deemed to be illegal in each of these scenarios.

Any agreement that has an illegal purpose or value is invalid.

When the legal consideration or the object of an agreement are no longer acceptable under the law,
they are no longer considered legal consideration or object. They then take on an illegal character.
Therefore, such an agreement is no longer legal or of any real substance. The act of considering a
thing unlawfully includes behaviours that are expressly illegal. Additionally included here are those
that are prohibited by rules and regulations issued by the relevant government. However, the
regulations created by such agencies won't be used at all if they are not in accordance with the law.

It is not necessary that something that is invalid also be "illegal by law" since "forbidden by law" is
not the same as the phrase "void."

7 Indian Contract Act,1872

 Dip Narain Singh vs Nageshar Prasad8 “According to Section 23 of the Indian Contract Act, a
consideration or object of an agreement is illegal if: (1) it is prohibited by law; (2) it is of such a
nature that, if permitted, it would violate the terms of any law; (3) it is dishonest, involves or
implies injury to the person or property of another; is immoral; or is in conflict with public policy.
Leaving aside the third type, which is not relevant to the situation at hand, we must determine
whether the mortgage was prohibited by law or is of a character that, if permitted, would violate any
legal prohibitions. There is a substantial difference between an agreement that is just deemed void
and one that may be prohibited by law. In the first scenario, the law either permits or forbids it. In
the latter situation, it just declines to give it effect. The promisor may not, in equity, be permitted to
repudiate an invalid contract after consideration has been paid and the contract has been carried out
without compensating him for the advantage he has already received. He wouldn't get any
assistance from a court of law, however, if the pledge is brought to court to be enforced. As was
already said, it is not legally illegal to transfer an occupancy tenancy; rather, it is deemed null and
invalid. However, if it consists of several separate, separable parts, the entire transaction cannot take
place unless the provisions of Section 24 of the Contract Act are applicable to it. If the effect of
enforcing the contract would necessarily be to defeat the provisions, the contract would
undoubtedly be void under any law”.

Since Sections 24 to 30 of the Indian Contact Act clearly state that certain sorts of agreements are
unlawful, it should not be officially ruled void. For instance, the agreement to forbid marriage has
been covered under section 26 of the ICA. Therefore, if X offers to pay Y Rs 50000 if she does not
marry for the rest of her life and Y, in turn, undertakes not to marry at all, the agreement is illegal
since it is in violation of Sec 26. Likewise, any agreements that restrict commerce, impede legal
processes, are ambiguous, or include wagers are specifically deemed invalid.

By acknowledging these essentials, we came to how usual contracts are different from contract with
enemy nations and these exceptions make the contact void. Lawful object is most important
essential and by this missing these contracts is not executed and also against the state and its policy.
Because when any nation is considered to be enemy its start affecting everything we get from that
nation. Like in world war we see how different nations formed Acts and Statute to regulate that type
of contract.

8 Dip Narain Singh vs Nageshar Prasad 1930 (AIR)1930 All 1

 ENEMY ACT OF DIFFERENT NATIONS

TRADING WITH ENEMY ACT 1939(UNITED KINGDOM)

“An Act to impose penalties for trading with the enemy, to make provision as respects the property
of enemies and enemy subjects, and for purposes connected with the matters aforesaid9”.

A person who transacts with an enemy within the meaning of this Act is guilty of the offence of
doing so and is subject to the following penalties: (a) upon conviction on an indictment, a term of
penal servitude not to exceed seven years, a fine, or both such a fine and a fine; or (b) upon
conviction on a summary conviction, a term of imprisonment not to exceed twelve months, a fine,
or both such a fine and a fine.

Definition of Enemy in the is stated as for the purposes of this Act, the term "enemy" means—
subject to the requirements of this section.

Any country or king of a country at conflict with His Majesty,

b) Anyone residing in enemy state;

(c)Any group of people engaged in commerce wherever, whether they are corporations or not, if
and for as long as they are controlled by someone who is an enemy as defined by this section, or

(d)Any group of people organised or created by, or operating under the rules of, a State at war with
His Majesty; nevertheless, this exempts any individual simply because he or she is a subject of an
enemy state.

(2) The Board of Trade may, by order, require that any person named in the order should, for the
purposes of this Act, comply with the directives in the order.

TRADING WITH ENEMY ACT (UNITED STATES AMERICA)

For the purposes of this chapter and such trade, the term "enemy" must be considered to mean—

9 Trade with enemy act 1935

(a) Any individual, partnership, or other group of people of any nationality who resides in the
territory (including that which is occupied by military and naval forces) of a nation with which the
United States is at war, or who is a resident of another nation but transacts business there, or who is
a corporation established within that territory of a nation with which the United States is at war, or
who is a corporation established in any nation other than the United States.

(b) The government of any country that the United States is at war with, as well as any political or
municipal entity of that country.

c) The President may, by proclamation, include within the term "enemy" any other people, or group
of people, who may be natives, citizens, or subjects of any country with which the United States is
at war, aside from American citizens, wherever they may reside or conduct business. This is only
applicable if the President determines that doing so is necessary for the safety of the United States
or the successful conduct of the war.

Act prohibited by law

It is prohibited to:

(a) It is against the law for anyone in the United States to conduct, or attempt to conduct, any
direct or indirect trade with, to, from, for, on behalf of, or for the benefit of, any other person
with knowledge or a good faith belief that such other person is an enemy or an ally of an
enemy, or is conducting or participating in any such trade without the President's permission
or with the permission of the enemy or an ally of an enemy. It is prohibited to:

(b) Communications by mail, cable, radio, or other means of transmission passing between the
United States and any foreign country he may from time to time specify, or which may be
carried by any vessel or other means of transportation touching at any port, place, or
territory of the United States, may be censored under such rules and regulations as he may
from time to time establish. as provided in this chapter.

Penalty under law-

According to Section 5(b) of the Act of October 6, 1917, as modified [50 U.S.C. 4305(b)],

"Any person who wilfully violates any of the provisions of this subdivision or of any licence, order,
rule, or regulation issued thereunder shall, upon conviction, be subject to a fine of not more than
$10,000, or, if a natural person, shall be subject to a term of imprisonment not to exceed ten years,
or both; and any officer, director, or agent of any corporation who knowingly participates in such
violation shall be subject to a like fine, imprisonment, or both."

Trading with India Enemy Act 1947

An Act to secure the maintenance of certain provisions of the Defence of India Rules relating to the
control of dealing with States, people, and entities associated with States at war with the
Government of India, and the custody of the property belonging to them

Whereas it is reasonable to maintain some sections of the defence of India regulations pertaining to
the control of trade with states, individuals, and companies that are a part of states at war with the
government of India, as well as the custody of the property belonging to them.

Sec 1 of act talks about the title of act and explains that the act is applicable to all citizens of India
residing inside or outside of India. In all the act talks about all the power lie in the hand of central
government to which contact they want to enforce. They have special power to which contact they
want to force in the court. It’s their discretion to which they consider enemy state. If any contract
was form in good faith, then that contract can be enforceable in the law.

P.Thiruvarangiah vs D.k Panaia And Co.( Case Analysis)

MATERIAL FACTS- This is a lawsuit seeking compensation for losses caused by the parties'
breach of three contracts, dated April 24, April 27, and April 30, 1914, in which the plaintiff
committed to buy a specific number of cases of Belgium window glass. We do not know the exact
date those goods were shipped, but given that the bills of exchange were dated July 29 and the
invoices were dated July 23, 1914, it is likely that they were shipped between those dates. It is also
conceded for the purposes of this case that they were shipped before the 3 August declaration of war
between Germany and Great Britain. The contracts were sent aboard a German ship with the

following terms: c.i.f., Madras. War broke out while ship was on journey; and eventually “captured
and brought to Colombo where the ship was condemned as a prize, but ship was allowed to proceed
to the ports in the British Empire where she had cargo consigned for and to discharge that cargo
there”. Eventually, arrangements were made by which the government of this country agreed to
deliver to British subjects. All of this had the effect of putting the defendant in a position to provide
the plaintiff these glass containers and accept payment for them when the ship arrived at Madras in
May 1916, had he been so inclined, court grant that. If he was obligated to do so, that is the
question. “There has been some discussion recently as to whether or not it would be correct to
speak of a c.i.f., contract in the language of Scrutton”, J. as a sale of documents and not of goods."
Bankes, L.J. in Arnold Karberg and Co. v. Blythe Green10, Jourdain and Co, says "I am not able to
agree with that view of the contract, that it is a sale of documents relating to, the goods. I prefer to
look upon it as a contract for the sale of goods to be performed by the delivery of documents, and
what those documents are must depend upon the terms of the contract itself". That seems to me a
distinction so subtle as really to be immaterial. The key issue is that, under a c.i.f. contract, the
documents of title to the items are what are anticipated and intended to be handed to the final buyer.
It clearly states that it is a sale of things, but it is also meant to be carried out by the delivery of the
commodities' title documents rather than the actual goods themselves. “What are those documents,
exactly? It is the vendor's obligation under the terms of the contract to ship the goods and get the
bill of lading in respect of them from the ship's agents. Next, there has to be an insurance policy in
an authorised form”. According to observations by court, it is what the ruling in Arnold Karberg
and Co. v. Blythe Green, Jourdain and Co as well as Scrutton, J.'s extremely illuminating decision
in the court beow. In Arnhold Karberg and Company v. Blythe Green11, Jourdain, “In that case, it
was determined that when a seller offered to a buyer documents under a c.i.f. contract that included
a bill of lading on a German ship, the tender was flawed not because the loading of the goods onto
the ship was done perfectly in accordance with the contract at the time it was done, but rather
because the event of the outbreak of war had made that contract illegal, causing it to be enforced,
that by way of tender on the buyer was equivalent to saying under the terms of your contract I shall
make you trade with the enemy." It ultimately comes down to that. Since Willes, J., made the
observation in Esposito v. Bowden12 ,there has never been any question about the fact that

10 Bankes, L.J. in Arnold Karberg and Co. v. Blythe Green, Jourdain and Co. (1916) 1 K.B. 495

Arnhold Karberg and Company v. Blythe Green11, Jourdain, and Co. (l95) 2 K.B. 379
12 Esposito v. Bowden (1857) 7 E. & B. 763
concluding an affreightment contract with a foreign foe constitutes trading with that foe and renders
such contracts null and void upon the outbreak of hostilities.

JUDGEMENT -I am happy to base this judgement on those overarching factors, and I believe I
should have been as comfortable to base it on the authority of the judgments from the English Court
of Appeal. In Marshall and CO. v. Naginchand Fulchand13, “Beaman, J. reached essentially the
same decision as had already been reached in Bombay. The judgement of the Bombay and Calcutta
High Courts, which believe to be entirely in agreement with the principles set forth by the English
Court of Appeal”, is one that the court would not disagree with even if they had any doubts about it
because they believe it to be “extremely desirable that the Courts of the Empire, because
commercial transactions of this kind extend throughout the Empire, speak with one voice”. As a
result, court are compelled to award the defendant with costs on this basis alone.

CONTRACT WITH ENEMY NATION CURRENT SCENARIO

When we see current scenario of the world where whole world is interconnected and everything is
dependent on supply chain of products. Every nation is getting something or other thing from any
nation, so when whole world is dependent on everyone how can we afford to end all the contracts
that are prior to the war. When we talk about states security is more about its people whom we want
to protect so, by ending all the contracts we just making the life of these people only difficult.

We can better understand by evaluating a situation in RUSSIA and UKRAINE war that we see in
present time. Russia a country that is superpower in arms and mostly dependent on food stuffs from
Ukraine like wheat a basic necessity that every human need to survive and in vice versa Ukraine
need energy and gases that Russia has in abundance and the climate where both countries are there
is extremely cold temperature and Ukraine is totally dependent on gas energy from Russia.

If we are in the situation of war or any country is our enemy nation but then also the contract of
essential should not become void because the war is also is happening for his citizen only then
why by making the contact of essentials become void. Contract of essential needs are those on
which every human life depends and if these contracts become void how the average people
survive. Because how anyone can survive without basic needs and if the contracts of basic needs
become void how the income of person can be generated. We can better understand by observing

13 Marshall and CO. v. Naginchand Fulchand (1916) 18 Bom. L.R. 915, Beaman

 the condition of India and Pakistan and their agreement how they harm normal people life. Just take
the example we import lots of cotton from Pakistan and during the war if that import get blocked
who suffers Indian market and by this normal people life get affected and by that we see the rise of
price in market due to which common man suffer. Agreements which are prior to war also get
frustrated and many times if clause of frustration is not available then parties have to pay damages
also.

Therefore, for common people there should be a clause for contract of essentials that should not
become void during the war because when whole world is inter dependent how can we survive if
contract of essentials needs also became

CONCLUSION

By now, we have mostly covered the ground, on which war with nations affect and the conflicts
between them influence a lot of contracts. The goal of war, as we've discovered, is to impose public
pressure on one nation to submit to another's wishes. To make all of the residents of one state
hostile against the residents of the other is an inevitable outcome of their governments' conflict. Our
battle seems to have the effect of putting the world into make citizens and belligerents into legal
adversaries who are not at war with one another; to put citizens and belligerents in a condition of
non-interaction; to Interaction between civilians and belligerents is put on hold, and partnerships are
broken off. However, once again, our contemporary concepts have enlarged, and the remedies have
now been halted instead unlike the rights. We may even carry on our intercourse and business with
combatants by acquiring a licence. It is possible to distinguish between contracts that are performed
and those yet to perform. The existence of certain contracts helps to balance out unexecuted. Which
are incompatible with licence contracts and suspensions.

The border is growing finer, and the theory of preservation and the demands of modern merchants
place great pressure on the formerly unquestioned law of nation.

When we talk about position of different country and their law which govern the situation in the
war we certainly found they are certainly more hostile towards laws. Hostile laws only affect their
people and helps other country only to grow. If they have some lenient law for trading with enemy
state its will help the both nation economy and the contracts which forms before the war will should
also not become void if they contracts of necessity. Contracts of necessity should give the priority

for the help of common people because those common people are mostly the affected ones and if
state wants to work for the welfare of state, then by making such hostile laws its only going to
affect his people only.